Tuesday, July 15, 2008

US socialism and the surging nanny-state.

It is a myth that America is a free-market heaven.

by Lego Acies



One of the great myths in America is that the USA is the nexus of individual freedom, free markets and cowboy capitalism. Nonsense. Post 19th century American history has been dominated by government, not the market. America is well on its way to becoming a larger France, or a more grown up version of Sweden. The current 'financial crisis' illustrates the American obsession with government. The US government creates problems, becomes 'very concerned', proposes solutions and generates more damage, debt, wealth reduction and corruption. The US is well on its way to go financially and morally bankrupt.

How bad is the US government, or rather the various levels of US governance? The current US debt of all governmental levels is approaching 1 times GDP or about $14 Trillion. This is what is termed on the balance sheet debt. But politicians are cunning creatures. About $60 Trillon of future debt and obligations – or 4 times the current GDP level – sits off the balance sheet. These are obligations written out by government as contractual payments to its citizens for health care, pensions, and guaranteed program spending. But they never appear on the US governments financial statements. Doing the same in a publicly traded company would land the chief operating officers in prison.

But you will never hear the caviling, chattering marxists and relativists blame government, nor government spending for financial crises or economic hardships. Of course not. It must be the military-industrial complex or the free market which is to blame. In reality the US is going bankrupt from the mommy-state – not from military spending. The military's budget is a paltry $400 billion per annum – or 13% of the US Federal budget. The vast majority of the US federal budget – some 2/3 – is targeted for guaranteed program spending on health, pensions, transfers, subsidies and welfare. The all-caring, all-loving mommy state. [aww] The US actually spends too little on its military. For a world power the US should be doubling its military spend but it can't – thanks to the mommy-state budgeting it employs. All to buy votes, cry, be compassionate and pat oneself on the back [sniff sniff].

The problem with the US is not the 'market', not individual transactions, not freedom of choice, not the freedom to fail or win, but the lack of these now being options. In the US, like in Europe, no one is allowed to lose. You want to speculate in housing? Go ahead we will give you free money and guarantee a return and if you lose money, then we will send you cheques to cover the costs. A farmer are you? Step right up we have lots of subsidies and tariffs to help you out. A 'minority' or a woman – money and programs galore to help you and expiate white male guilt. A bank, a broker, a manufacturer, GM, IBM – no problems lots of money to spread around and lots of programs to guarantee that you don't fail – you are after all too large and too important and generate too many jobs to actually fail.

So the moral decline continues. Lower standards, reverse discrimination, an aversion to risk, a dependence on government to survive, reduced innovation levels – all of these elements of lethargy and whining distort and evenutally derail an economy and society at large. The US government in toto, takes 34% of GDP directly and another 10-12% indirectly. In other words about 45% of the US economy is state managed. This is capitalism? This is ossified statism and it will destroy America.

Witness the current so-called financial crisis one wrought by government. In the 1930s the US government created two socialist insitutions to manage the lending of money to the housing market. They socialised the risk [government guarantees] while privatising the profit [the companies in 1967 were listed on the US stock exchanges]. Then during the 1970s the stupidest man in US history – Jimmy Carter – and his little friends created the Community Reinvestment Act or CRA, a bureaucratic nightmare designed to force banks with government coercion to lend to minorities, poor whites, illegals and those with no income verification. The results over 30-60 years from US governmental interference in private land transactions has been entirely predictable.

The 2 socialist institutions of Freddie Mac and Fannie Mae besides being corrupt and incompetent completely distorted the market. Not open to competition and protected by government, they created a duopoly in mortgage lending to the great vast bulk of the middle class. They gave loans to people who had no business getting large sums of borrowed capital to buy property. Not being transparent they had no need to operate like a private business – the government after all guaranteed their existence. They mirrored the ignorance of the CRA – an act which forced banks to lend a certain % of their assets to those with no income proof. Speculation was thus assured. I have a book called 'Making Millions in Real Estate' by a peddlar who bought 50 yes 50 condos in Washington D.C. with no money down. Easy money, low interest rates, government programs, government guarantees – these are the elements in a very combustible and toxic real estate mixture.

So it is no surprise that thanks to governmental incompetence including cheap and easy money, distorting programs, and various guarantees that banks, feeling that they are too big to fail, or that government money will bail them out, decided to lend like idiots to anyone who could walk upright and not drool when asking for a loan. Business practices which would have been enforced and enshrined in a competitive market disappeared. Greed, stupidity and the belief that government will come to our aid if there is a problem, permeated the entire US financial industry as institutions rushed out new property loan, car loan, consumer loan, and equity loan products. It is absolute madness.

The current government created financial crisis is just another example of the American desire to become a larger Sweden. As the Wall Street Journal recently stated, 'At the same time, the ad hoc moves have pushed the government into the unfamiliar position of backing big chunks of what used to be privately held debt, from student loans to mortgages to investment-bank assets. Merrill Lynch & Co.'s economists, in a research report Monday, described the move as more evidence the U.S. is steadily embracing the "Swedish model": directly intervening to solve economic ills. As the banking and finance sector continues to struggle, many assume more such moves are likely.'

Thanks to government meddling the US taxpayer will have to pay out about $5 Trillion to cover the banking industries mismanaged indiscretions and fraud.

It is a lie that Americans are free market capitalists. They are not. Maybe the level of US government mischief and corruption is below that of Europe – for now. But that will soon change. To solve the current 'crisis' the blowhards in Washington will devise more regulations, programs, government agencies and mommy-state solutions to regulate the vagaries of the 'market'. Or so they will say. In actual fact it should be the opposite. If only we could have the market regulate the smiling, chattering idiot class which causes the problems.